Pre-Round Co-Founders' Agreement: Vesting, Disputes and Exits Before VCs Step In

Our firm supports over 200 growing companies each year. In that volume, the leading cause of pre-Series A due diligence blockers is not valuation, traction or accounts: it is the absence or poor drafting of a co-founders' agreement signed well before investors arrive. A co-founder who left 18 months ago without an exit clause, badly defined vesting, or no decision rules: these blind spots paralyse the round and are expensive to fix.

This article focuses exclusively on the pre-round co-founders' agreement (before any external investor), distinct from the post-VC shareholders' agreement we cover in our 15 vital clauses post.

This article is pedagogical. Any shareholders' agreement must be drafted by a lawyer. Examples are illustrative.

• A pre-round co-founders' agreement is a dispute prevention tool, not a sign of distrust.
• Four pillars: vesting, governance, dispute resolution, co-founder exit.
• Without an agreement, French default law applies — and it is rarely fit for a fast-growing startup.
• An agreement signed by 2 or 3 co-founders prepares but does not replace the shareholders' agreement signed with investors at closing.

Many co-founders defer this topic to the first round, telling themselves "VCs will impose a pact anyway". That is a mistake. Three reasons:

• Inverted leverage: without a pre-existing pact, founders negotiate vesting and governance with a VC in a dominant position, rather than amongst themselves in a calm setting.
• Historical effect: if a co-founder leaves 12 months before the round without an exit clause, they keep all their equity. The cap table becomes locked.
• Legal effect: French default law (Article 1832 of the Civil Code et seq.) provides for neither vesting nor exit clauses. Everything must be organised contractually.

Cost of a well-drafted pre-round agreement: roughly EUR 3,000 to 8,000 excl. VAT. Cost of an unmanaged dispute: regularly tens of thousands of euros in legal fees and round delay.

Vesting is the progressive acquisition by each co-founder of their shares. Without vesting, a co-founder leaving after 6 months keeps all their equity, creating a dead cap table that is highly problematic later.

2026 standard parameters#

• Duration: 4 years with 1-year cliff. No share is finally vested before year one; thereafter monthly or quarterly linear vesting.
• Legal mechanic: promise to transfer at par value to the company (or other co-founders) on departure before vesting completion.
• Vesting credit: if the co-founder has been working for 12 or 18 months already, the agreement may credit that time.

Articulation with future VC vesting#

Founder vesting is synchronised at the round with the vesting imposed by VCs: the clock may be reset, extended or maintained. The agreement must include this synchronisation clause to avoid a confrontational renegotiation.

Before the round, governance is built between co-founders: who decides what, at what majority, and which matters require unanimity.

Decision categories#

Role allocation#

The pact specifies functional roles (CEO, CTO, CPO, COO) and the corresponding powers of attorney. With a CEO/CTO duo, expressly state that the CEO represents the company to third parties, save for technical areas delegated to the CTO.

Fifty per cent of startups will face a major co-founder disagreement within the first three years. The question is not whether, but how the pact handles disputes.

Recommended mechanisms#

1. Mandatory pre-litigation mediation: before any court proceeding, mediation by a third party (Paris Centre of Mediation and Arbitration or equivalent) over 30 to 60 days.
2. Cooling-off clause: for certain decisions, mandatory 7 or 14-day delay between proposal and vote, to avoid heat-of-the-moment decisions.
3. Independent third-party tiebreaker: option to co-opt a third party (advisor, mentor, accountant) as arbiter on certain matters in 50/50 deadlocks.
4. Buy-or-sell (Texas shoot-out): in persistent deadlock between two equal co-founders, one names a per-share price; the other chooses to buy or sell at that price. Radical but effective.

Legal limits#

Léonine clauses (Article 1844-1 of the Civil Code) are void: a co-founder cannot be entirely excluded from profits or fully exonerated from losses. A buy-or-sell at a derisory price could be re-qualified.

The most emotionally charged area — and the one that must be drafted most coldly, before the dispute arises.

Typical cases#

Exclusion clause (SAS) — Article L. 227-16#

The Commercial Code allows, in a SAS, to provide in the by-laws for the exclusion of a shareholder (Article L. 227-16). This clause is very powerful but must be precisely drafted:

• Define the grounds for exclusion (serious misconduct, breach of obligations);
• Provide a contradictory procedure (the concerned shareholder must be heard);
• Set the valuation method for the bought-back shares.

Without rigorous framing, the clause is regularly invalidated by courts.

When a founder consults us to prepare a round, our first question — before valuation, before accounts — is "what agreement have you signed between co-founders?". If the answer is "none" or "a 2-page Internet template", we know the first weeks of the engagement will be devoted to structuring this base. Otherwise, VC due diligence will expose every flaw at the worst moment.

Classic mistake: sign a "light" pact at incorporation, then never touch it for 4 years despite the arrival of a third co-founder, the departure of a first, or a business model pivot. The pact must be revisited at every structural event (new co-founder, new pivot, first key hire).

Three frequent blind spots:

• Intellectual property: without an explicit clause, IP developed by a co-founder before joining does not automatically belong to the company. Every pact must include an explicit IP assignment (and an IP audit will happen at VC due diligence).
• Post-departure non-compete: must be drafted with financial consideration, limited duration and geography, otherwise it is void.
• Exit tax: a buyback at par value in a bad leaver scenario can generate taxation for the leaving co-founder (latent capital gain). Anticipate the tax mechanic.

• Sign a co-founders' agreement at incorporation (or within the first 6 months), even in a friendly duo.
• Put vesting in place from day one, not at the round.
• Revisit the pact at every major event (new co-founder, pivot, first key hire).
• Articulate the founder pact with the future VC pact from the start: avoid contradictions that complicate the round.

• Distant / hybrid co-founders: remote work multiplies divergences on commitment and productivity. The pact must clarify commitment obligations (full-time, exclusivity, location).
• AI / no-code co-founders: outsourced technical co-foundations (a tech founder at 30% of their time) are fragile. Document scope and commitment clearly.
• JEI / R&D tax credit status: certain clauses (exclusivity, working time) interact with Young Innovative Company conditions.
• GDPR compliance: handling of personal data shared between co-founders (customers, prospects) must be clarified to avoid joint liability in case of leak.